Labour's odd Brexit silence as Goldman Sachs details costs

For the avoidance of doubt, losing out on 5% of potential gross domestic product is a huge deal and, by natural extension, a major blow to living standards.

In the research published last Friday night, the Goldman economists observe: “The UK has significantly underperformed other advanced economies since the 2016 EU referendum, with lower growth and higher inflation.”

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They note: “Our analysis suggests that UK real GDP has fallen short of similar countries - summarised with an estimated ‘Doppelgänger’ - by about 5% since the referendum. The uncertainty around this estimate, however, is significant, ranging from 4% to 8%, and not all of the UK’s growth underperformance can be attributed to Brexit, as both the pandemic and the energy crisis weighed strongly on the UK economy.

“That said, the Doppelgänger estimates of the Brexit costs are quite consistent with prior studies, which likewise cluster around 5%.”

What was just as striking as that finding - which should not have surprised anyone who actually knows about Brexit as opposed to those who like to embrace it through the topsy-turvy lens of British nationalism - was Labour’s silence about it.

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This was not a great shock either, given Labour leader Sir Keir Starmer has gone from being one of the most vociferous opponents of Brexit in late 2019 to embracing the folly.

However, it is remarkable nonetheless.

Usually, you might expect the Opposition to take issue with the Government if it emerged that a catastrophic misjudgement had resulted in the UK effectively losing a huge chunk of its economy.

Not so on this occasion, however.

Drew Hendry, the SNP’s economy spokesman at Westminster, said in the wake of the Goldman report: “Brexit continues to be a disaster for businesses, ordinary households and our wider economy - and it’s time the main UK parties at Westminster wake up to this reality.

“Every week we see at least one damning report showing the damage Brexit is doing to Scotland and the rest of the UK. Yet the Tories, Labour and Lib Dems continue their conspiracy of silence on the damage of Brexit.”

Whatever you might think of Mr Hendry’s remarks, there is no doubting that the Conservatives, Labour and the Liberal Democrats are awful quiet about the devastating effects of Brexit.

After all, there was plenty of ammunition in Goldman’s report with which to torment Prime Minister Rishi Sunak and his Cabinet of Brexiters.

Furthermore, US-based Goldman’s analysis was as Mr Hendry points out just the latest report to spell out the damage being done to the UK economy by the ruling Conservatives’ hard Brexit.

The Goldman economists find UK goods trade has “underperformed other advanced economies by around 15% since the referendum”.

They add that business investment has “been weak since 2016, falling notably short of the pre-referendum trend”.

And the Goldman economists declare: “Taken together, our analysis shows that lower EU immigration has likely played a role in exacerbating labour market tightness and thus contributed to the UK’s higher inflation rates since 2016.”

Noting net immigration from the EU peaked at more than 300,000 per year in the 12 months to the second quarter of 2016 but is now negative, they observe: ““EU immigrants tended to have high labour market participation rates, as many of them entered the UK specifically to work. By contrast, many recent arrivals are students, meaning that immigration may be playing less of a role in boosting labour supply than the headline numbers suggest.”

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Of course, the Goldman economists’ report, in the round, chimes with what businesses of all sizes in myriad sectors, in Scotland and the rest of the UK, have been saying about Brexit. That said, it would be difficult to overstate the importance of this research from the heavyweight international investment bank.

Among other crucial research on Brexit has been that by John Springford, associate fellow at the Centre for European Reform.

His report on the cost of leaving the EU to the UK economy, published in December 2022, estimates that Brexit had, by the second quarter of 2022, reduced the country’s GDP by 5.5%.

In the spring of last year, Office for Budget Responsibility chairman Richard Hughes summed up Brexit’s effect as follows: “We think that in the long run it reduces our overall output by around 4% compared with had we remained in the EU.”

Forecasts drawn up by Theresa May’s government in 2018 showed Brexit would, with an average free trade deal with the EU, result in UK GDP in 15 years’ time being 4.9% lower than if the country had stayed in the bloc if there were no change to migration arrangements. Or 6.7% worse on the basis of zero net inflow of workers from European Economic Area countries.

The huge damage that would flow from a realisation by the Tory Brexiters of their dream of the UK leaving the single market and customs union was clear for years before the hard departure was finalised.

And remember voters were not asked in the 2016 referendum about whether they wanted to remain in the single market.

Since the UK left the single market on December 31, 2020, after its technical Brexit in January that year, the damage has racked up on the scale that it was predicted it would.

It was inevitable, of course.

You would expect silence on this debacle from those who brought it about - the Conservatives.

However, who would have conceived in late 2019 that Sir Keir would not be highlighting the loss of a massive amount of economic output caused by the foolish actions of those who are meant to be his political opponents?

Yet, that is where we are.

It is an incredible situation. And it is pathetic. Those who govern or aspire to lead the UK should surely have the courage to tell people what Brexit has actually done, pointing to the raft of evidence, and then be brave enough to sort out the problem.

Rejoining the EU should absolutely be the ultimate aim.

That said, this would be a protracted process, in all likelihood, and the UK would not enjoy the privileges it had before it left the EU, both financial and in terms of the previous exemption from adopting the euro.

However, taking the UK back into the European single market, regaining frictionless trade with the country’s biggest trading partner and the benefits of free movement of people from and to the EEA, would be relatively fast and simple.